Share

Trending Discussions

$60 Oil Could Revive The Eagle Ford

The world’s hottest shale play right now, the Permian, is boosting its oil production and contributing the most to the U.S. crude output growth. Meanwhile, Texas’ other shale play, the once-hot Eagle Ford, has cooled, turning thriving communities into ghost towns.

The economic impact of the oil price crash is plainly seen across the counties in and around the Eagle Ford. Small business owners began struggling after the oil boom turned to gloom in 2014. Ghost towns and abandoned plots now bear the scars of the downturn, Bloomberg’s Dan Murtaugh and photographer Max Burkhalter report.

Photos of what could easily be mistaken for the set of The Walking Dead document how the Eagle Ford-related economy has suffered through the oil price crash. Still, the business owners who spoke to Bloomberg called the bottom of the downturn a few months ago, and report signs of a rebound lately.

Back in 2014—when oil prices were still around $100—the Eagle Ford’s economic impact was estimated at $123 billion in the 21-county area—an all-time high to-date, according to a June 2017 report by the University of Texas at San Antonio’s Institute for Economic Development. By last year, the economic impact had dropped to $50 billion. Employment related to Eagle Ford activity in the 21-county area dropped from 191,153 in 2014 to 108,000 in 2016, the report says.

Since the end of 2016, though, the Eagle Ford has shown signs of recovery. According to Dallas Fed’s most recent energy indicators report, Permian Basin output increased in August by 62,300 bpd to 2.52 million bpd. Eagle Ford’s production rose by 17,000 bpd to 1.28 million bpd.

“Eagle Ford production has been on an upward trend since it bottomed out in late 2016, although rig counts have been declining since reaching 86 on May 26,” Dallas Fed said, noting that the Eagle Ford output dropped in late August and early September due to curtailments amid Hurricane Harvey.

The EIA’s latest Drilling Productivity Report estimates the Eagle Ford oil production at 1.271 million bpd in October, revised down to reflect Harvey’s impact.

The Dallas Fed energy indicators report also highlighted that “Operators look to be moving rigs to more prolific counties within basins, such as Reeves County in the Permian Basin and Karnes County in the Eagle Ford.”

The number of all active oil and gas rigs in the United States fell last week by 1 rig. The total oil and gas rig count now stands at 935 rigs, up 424 rigs from the year prior. In the Eagle Ford, the number of rigs dropped to 68 from 71 last week, but is up by 31 rigs from the 37 rigs for the same week last year.

The Eagle Ford activity and oil production is inevitably tied to oil prices, which, after starting this year with WTI above $50 on the back of the initial enthusiasm over OPEC’s cuts, faltered in March and dipped to $47.

Since then, the WTI price has faltered several times, entering a bear market in June, dipping to $43 and shedding more than 20 percent from recent highs. But earlier this week, oil returned to a bull market and WTI hit a seven-month high at $52.22, as sentiment turned bullish with growing evidence that the market is rebalancing, strong oil demand growth, and a supply concern over possible disruption of oil exports from Kurdistan.

At $51-52-per-barrel oil, U.S. shale drillers are hedging anew to lock in future production prices. Hedging activity has sped up since WTI broke above $50.

“There’s been more producer-hedging in the past two weeks than in the past four or five months,” one banker told the Financial Times.

The Eagle Ford and its zombie-apocalypse-like small town landscape will only benefit from locked-in future sales and a prolonged bull market in oil. Oil prices may never return to $100 again, and the dizziest oil-boom spending days may be over, but there’s still life left in the Eagle Ford patch.

No industry can be run to protect the petrodollar when it's the government who spends,spends,spends. Now no employees, no financing and after Permian runs low, good luck.

Leave a comment

First Name

Last Name

Email

That email address is already in the database. Please login to your account to post your comment, or enter a different email address to continue with your comment & account creation.

Captcha

Comment

Please understand that, by submitting this form, you will be creating a free OilPrice.com account, and therefore agree to abide by our Terms of Use. Your details will be stored in our database and shared with our third party mailing list provider. You will be sent an email containing a link that will ask you to generate a new password - please follow the link to complete your OilPrice account activation.

We will save the information entered above in our website. Your comment will then await moderation from one of our team. If approved, your data will then be publically viewable on this article. Please confirm you understand and are happy with this and our privacy policy by ticking this box. You can withdraw your consent, or ask us to give you a copy of the information we have stored, at any time by contacting us.